Developer David Syre and his ex-wife, Kay, have agreed to settle a long-running legal dispute on a 10-year-old real estate loan by paying Polygon Financial $6.5 million as part of financial reorganization terms being worked out in U.S. Bankruptcy Court in Seattle.
That $6.5 million is far less than the $11.3 million that Polygon's attorneys claimed the Bow-based company was entitled to under terms of a 2002 loan to Syre's Trillium Corp. But it also is $6.5 million more than Syre originally had been willing to pay.
Because the $17.6 million loan to Trillium was made by now-defunct Old Standard Life Insurance Co., it has touched off a tangled chain of defaults, refinancings, federal investigations, lawsuits and property foreclosures.
Polygon bought the loan for $14.5 million in 2005, after Old Standard and an affiliated company, Metropolitan Mortgage of Spokane, collapsed and left thousands of small investors in the lurch.
In court documents, Syre and his ex-wife argued that Polygon was effectively paid in full in mid-2011 when the company foreclosed on 353 acres of Trillium land at Birch Point, near Semiahmoo Golf and Country Club.
But Polygon and its boss, Werner Paulus, insisted that the 353 acres were worth only a fraction of the Syres' remaining debt.
In 2009, Polygon also took over Trillium's 3,000 acres on Galbraith Mountain, a popular biking area, in an action related to the default on the same loan.
Although the 2002 loan was made to Trillium Corp., the Bellingham development firm that Syre founded in 1974, both Syre and his then-wife personally guaranteed the loan and reaffirmed those guarantees in later refinancing agreements.
In 2011, Polygon went to Whatcom County Superior Court and obtained a writ of attachment on Kay Syre's home, David Syre's family farm, and other David Syre properties in the Cordata and Semiahmoo areas. The writ prevented the Syres from disposing of those properties while Polygon pursued its unpaid debt claim in court.
Polygon's legal moves in Whatcom County spurred both David and Kay Syre to file individual reorganization proceedings in the federal bankruptcy court, seeking more time to pay Polygon and other creditors claiming millions more in debts.
But the $6.5 million settlement with Polygon is not yet official. One of Syre's other creditors, Shames Makovsky Mortgage of Denver, has already filed an objection to the Syre-Polygon deal with the bankruptcy court, claiming that terms of the deal will make it more difficult for Shames Makovsky to win repayment of its own $6.9 million claim against the Syres.
The financial reorganization plan for David Syre is a complex one that requires him to pay millions of dollars per year into a distribution fund for gradual repayment of creditors between now and June 2016. At that time, if all goes according to plan, Syre will have paid a minimum of $18.3 million.
During its heyday in the 1980s, Syre's Trillium Corp. created Bellis Fair mall, the Semiahmoo development, and Cordata Business Park. Syre also donated land that became the core of the Whatcom Community College campus, where the Syre Auditorium bears his name.